What does difficulty mean?

When discussing difficulty in terms of cryptocurrency we are referring to the difficulty of successfully mining a block of transaction information.

Each cryptocurrency has a cryptographic algorithm that determines the difficulty involved in solving the problem that mines a block. And each has a method for adjusting difficulty so that blocks are not mined too quickly or easily.

While you probably haven’t thought about it, setting the mining difficulty of a coin is a critical task, and one that has to be approached with finesse and balance.

If it is too easy to mine blocks the market will quickly become flooded with coins, rendering them worthless. If it is too difficult to mine a block the miners soon lose interest as they aren’t making any profits.

The issue of too much difficulty has already come up in relation to Bitcoin. It is now become so difficult to mine Bitcoin that many miners have been unable to justify the cost of the specialized hardware needed to mine a block successfully.

Collective mining has eased this pressure somewhat, but many miners have already headed off in search of an easier, and more profitable, coin to mine.